Global dairy market outlook – market fundamentals are currently balanced
Global milk supply has been weaker than normal in 2019 but is forecast to begin moving on a stronger growth trajectory over coming months, driven by the US and EU. Global demand remains dynamic with a record EU SMP performance in 2019. The profile for international demand is taking place a bit sooner in Q4 2019 due to a number of demand events such as Ramadan and Chinese New Year occurring earlier in 2020.
The realignment of protein and fat values continues
SMP prices have risen with benefits to other products including EMP, WPC35, MPC80 and rennet casein. Butter prices are stagnant with higher stocks dampening sentiment.
EU SMP prices are likely to find support through early 2020 but upward pricing potential may begin to ease thereafter as Northern Hemisphere supply volumes increase and international demand becomes more challenged at higher prices.
EU fat prices are flat. Current stocks are heavy but EU butter exports are performing strongly which will help consume these surpluses. Volatility will remain a feature of the market. US retaliatory tariffs of additional 25% on EU/Irish butter are a negative and likely to see some demand eroded over time.
EU cheese will remain supported through relative SMP pricing and positive exports, though Brexit dynamics will continue in early 2020.
The whey product complex is challenged as African Swine Fever disease, stalling China infant formula demand and higher stocks constrain demand.
Short-term global outlook is relatively stable but tipping point will come as global milk flows begin to strengthen and near-term robust demand activity eases in coming months.
External/geopolitical and trade factors remain a concern, in particular continuing uncertainty around Brexit, the ongoing US-China trade dispute and EU-US relations.